Shutdown Affecting Digital Asset Treasuries Most: Carmel

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00:00This government shutdown was widely telegraphed. People knew it was going to happen. I'm curious

00:05what the lead up was like to the shutdown. How crazy did it get? It got a little wild. You had

00:12two schools of thoughts leading into the shutdown for issuers looking to go public. You had some

00:16who were about to maybe flip their registration statements public while they're currently

00:21confidential. And you had others like foreign private issuers who were financials who were

00:26about to go stale, looking to go effective. So people had to make a tough decision. Do we wait?

00:31Do we flip public now and have it sitting out there indefinitely? So it's been it's certainly

00:36been tumultuous. I can imagine. We're now 48 hours into this shutdown. It's likely to continue

00:43over the weekend into next week. What has activity looked like? Has everything shut down completely

00:48or is there still stuff going on behind the scenes? There's still stuff going on behind the

00:52scenes. You know, companies that still were going through the comment process are doing

00:56that. They're they're updating their registration statements. I think they're taking a little

01:01bit more time because, you know, the SEC won't even review these registration statements until

01:05the government reopens. So behind the scenes, we're still working on S1s and F1s, going through

01:11the comment process, cleaning them up and filing them, knowing that they won't be reviewed

01:16and the clock to review them won't even start until the SEC reopens.

01:21Right. So getting your ducks all in a row, essentially. Ross, what sectors in particular

01:25will be most affected by this ongoing shutdown?

01:28You know, other than obviously going through new issues are going to be affected, any kind

01:32of IPO. But I think what's really going to be affected is the uptick that we've seen

01:36in any kind of digital asset treasury strategy or crypto related transaction. Obviously, we've

01:42seen a huge uptick in these deals, specifically on the digital asset side. And those deals require

01:47typically when they're doing a pipe that a registration statement needs to go effective

01:52in order to register those shares. I expect we're going to see a significant slowdown on

01:57those deals, which has really helped market. Yeah. Although, I mean, there was a slowdown

02:01already in the in the DATS because we've seen some of their performance sort of falter a little

02:05bit here. The IPO market has been warm following the uncertainty sparked by Liberation Day, and

02:11it really started to regain its footing in the second half and in particular September

02:16as well. Is there a length of time that this shutdown could extend to that could really

02:20cause all this momentum that we have gathered to be lost?

02:24I think if we see anything that's longer than two weeks, investors are going to start to be

02:29concerned. You know, we've seen obviously we have a Congress that is very bipartisan.

02:37I think anything more than two weeks could cause serious concern in the IPO markets. We've obviously

02:43seen a giant uptick much better than 2024 than in 2023. We're hoping that this could be resolved

02:52quickly. And Ross, final question to you. What are you hearing from folks are worried about their

02:56financials getting stale that really need capital? Are they searching for alternative sources of

03:00funding? Yeah, absolutely. You see lots of issuers, particular ones that, you know, are not

03:07net income positive who will need funding to bridge this gap. The problem is, is that

03:12currently it's unknown how long the government shutdown will last. So what you see in these

03:18situations is issuers will take on sometimes short-term bridge capital, and that bridge capital

03:23tends to be expensive, which then frankly has ramifications on their potential IPS.

03:29Yeah, it all comes around eventually. Ross, thank you so much for joining us. Ross Carmel is

03:33partner at Sikensia Ross, Ferenc Carmel.

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